Commodities

Scrap import duty on cotton as it hurts garment exports, trade body tells Centre

Ahmedabad | Updated on June 28, 2021

CAI writes to FM, points to shortfall in extra-long staple cotton production

Reiterating its demand for withdrawal of 10 per cent customs duty on cotton imports, trade body Cotton Association of India (CAI) has expressed concerns of India losing its competitiveness to China, Pakistan and Bangladesh in the international market. With 10 per cent customs duty on cotton varieties including extra-long staple (ELS), the export-oriented garments and cotton-madeups become costlier thereby giving an edge to the close competitors.

The 10 per cent customs duty was imposed on cotton imports on February 2, 2021. The CAI has written a letter to the Union Finance Minister Nirmala Sitharaman seeking the withdrawal of duty. In the letter, Atul Ganatra, President, CAI, said that India produced merely 5-6 lakh bales (each of 170 kg) of ELS variety of cotton as against the local requirement of about 12 to 15 lakh bales of ELS and about 5-7 lakh bales of non ELS contamination-free sustainable cotton.

Shortfall

“India hardly produces this type of cotton and there is a clear shortfall of the same. India requires such ELS and contamination-free sustainable cotton not produced in our country to cater to the international demand. Due to the imposition of 10 per cent import duty on cotton, this raw material, which is being imported in India, has become costly thus reducing our competitiveness vis-à-vis other countries like China, Bangladesh, Pakistan and Vietnam,” Ganatra said.

CAI has urged the Finance Minister that 10 per cent import duty levied on cotton is not in the interest of the nation as it does more harm than good and interest of our domestic textile industry would be served better if 10 per cent import duty levied on cotton is withdrawn immediately. The cotton has been under Open General License (OGL) Scheme without any quantitative and qualitative restrictions for last several decades.

Moreover, prices of ELS cotton in India are very high and the range of ELS Kapas rate in the country is in between ₹8,500 to ₹9,000 per quintal which is higher by about ₹2,500 or about 30 per cent than the Minimum Support Price (MSP). Therefore, the interest of the farmers is not impacted adversely by removal of 10% import duty on cotton, Ganatra said. Cotton Association of India believes in free trade policy both for export and import of cotton and support no duties to be levied, the letter said.

Emphasising on the urgent need for withdrawal of import duty, Ganatra stated that if the import duty is not removed, our domestic prices will go up further and create more hardship to the domestic textile sector viz. spinning, weaving and garment industry. Cotton prices in the domestic markets have already gone up from ₹43,600 per candy (each of 356 kg of processed ginned 29.5 mm cotton) in January 2021, to ₹51,800 per candy now, indicating nearly 20 per cent rise in the prices.

Published on June 28, 2021

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